Highlights of Notice of amendments to Finance Bill, 2013 as passed by Lok Sabha
May, 04th 2013
HIGHLIGHTS OF NOTICE OF AMENDMENTS TO THE FINANCE BILL, 2013
1. Reference to FEMA, 1999 in the place of FERA, 1973/ FERA, 1947 under the Income-tax
Even after repeal of "Foreign Exchange Regulation Act, 1973", the Income -tax Act, 1961
continued to make a reference to the said Act in many of its sections, for example, section
10(4)(ii), 10(4B), etc. In order to correct this apparent mistake, a new clause (3A) is proposed
to be inserted in the Finance Bill, 2013 for substitution of the expression "Foreign Exchange
Management Act, 1999" in place of "Foreign Exchange Regulation Act, 1973" at all places in
the Income-tax Act, 1961.
A specific amendment has also been made in section 138 to substitute "Foreign Exchange
Regulation Act, 1947" with "Foreign Exchange Management Act, 1999".
2. "Authorised Person" under FEMA, 1999 to be the "person responsible for paying" for
the purpose of Chapter XVII and section 285
Section 204 provides for the meaning of the term "person responsible for paying" for the
purpose of Chapter XVII and section 285.
Clause (iia) of section 204 provides that the authorized dealer shall be the person responsible
for remitting the amount of consideration to a non-resident for the transfer of long term capital
asset or crediting such sum to his Non-resident (External) Account maintained in accordance
with FERA, 1973.
Consequent to the proposed substitution of the expression "FERA, 1973" with "FEMA 1999",
reference to the term "Authorised dealer" under FERA, 1973 is also proposed to be
substituted with the term "Authorized person" under FEMA, 1999.
3. Scope of exemption of income received in India in Indian currency by a foreign
company to be expanded
Section 10(48) was inserted by the Finance Act, 2012 w.e.f. A.Y.2012-13 to exempt any
income received in India in Indian currency by a foreign company on account of sale of crude
oil to any person in India.
The scope of section 10(48) is now proposed to be enlarged w.e.f. A.Y.2014-15 so as to also
provide exemption in respect of income received in India in Indian currency by a foreign
company from the sale of any other goods or rendering of services as may be notified by the
Central Government in this behalf to any person.
4. Trading in commodity derivatives not to be considered as a speculative transaction
The Commodities transaction tax is proposed to be introduced in a limited way by insertion of
Chapter VII in the Finance Bill, 2013. The Finance Minister, in his budget speech, had
clarified that trading in commodity derivatives will not be considered as a speculative
transaction. However, no amendment was proposed to this effect by the Finance Bill, 2013 in
section 43(5) defining a speculative transaction. Consequently, in the absence of specific
exclusion provision in section 43(5), characterisation of commodity derivative transactions
(including those which are subject to CTT) would be governed by the existing provisions and
they run the risk of being treated as speculative transactions, unless established by the
taxpayer to be for hedging purpose.
In order to give effect to the clarification given by the Finance Minister in his budget speech,
section 43(5) is proposed to be amended by inserting sub-clause (e) in its proviso to exclude
an eligible transaction in respect of trading in commodity derivatives carried out in a
recognized stock exchange from the definition of "speculative transaction". Explanation 2 is
proposed to be inserted to define the term "eligible transaction" in relation to commodity
5. Requirement of TRC to contain "prescribed particulars" to be dispensed with
Sub-section (4) of 90 and 90A provides that treaty benefit will not be available to any Non
Resident unless he furnishes TRC from the Government of his country of residence
containing such particulars as may be prescribed. The Finance Bill, 2013 had proposed to
insert sub-section (5) in sections 90 and 90A to provide that TRC shall be a necessary but not
a sufficient condition for claiming any relief under a DTAA.
The Finance Minister had subsequently clarified, by way of Press Release dated 1st March
2013, that the TRC issued by the Government of a foreign country would be accepted as
evidence of tax residency and the tax authorities cannot go behind the TRC to question the
In order to incorporate the said clarification in the statute, sub-section (4) of sections 90 and
90A is proposed to be amended to substitute the words "a certificate containing such
particulars as may be prescribed of his being a resident" with the words "a certificate of his
being a resident". Therefore, a certificate issued by the Government of a foreign country
would constitute proof of tax residency, without any further conditions regarding furnishing of
prescribed particulars therein.
Also, sub-section (5) of sections 90 and 90A which provided that TRC shall be a necessary
but not a sufficient condition for claiming any relief under a DTAA is proposed to be
substituted to provide that the assessee referred to under sub-section (4) of sections 90 and
90Ashall also provide such other documents and information, as may be prescribed.
6. New time limits for completion of assessment or reassessment under sections 153 and
153B in cases where reference is made to TPO to apply irrespective of the date of
reference to TPO or the date of passing of order under section 92CA(3)
Section 153 provides for the time limit for completion of assessments and reassessments.
With respect to income first assessable in the A.Y.2009-10 or any subsequent assessment
year, the Finance Act, 2012 had extended the time limit for completion of assessment under
section 143(3) or section 144 from 33 months to 3 years in case where, during the course of
the assessment proceeding, reference is made to the Transfer Pricing Officer (TPO) under
Further, where notice under section 148 is served on or after 1.4.2010, t he Finance Act, 2012
had extended the time limit for completion of assessment, reassessment or recomputation
under section 147 from 21 months to 2 years from the end of the financial year in which notice
under section 148 was served in a case where reference under section 92CA(1) is made
during the course of the assessment proceeding to the TPO.
However, in both the above cases, the extended time limit was applicable only if t he reference
- on or after 1st July, 2012 or
- before 1st July, 2012 but the order of TPO has not been made upto that date.
The said provisions are now proposed to be amended to provide that the extended time limits
of 3 years and 2 years, respectively, will be applicable irrespective of the time of making
reference to TPO and date of passing of order by the TPO.
Section 153B which deals with the time limit for completion of assessment in case of search
or requisition, is also proposed to be amended on the similar lines.
7. No requirement to obtain TAN by transferee deducting tax under section 194-IA
Section 194-IA was proposed to be inserted by the Finance Bill, 2013 to provide for deduction
of tax at source@1% on consideration for transfer of immovable property, other than
agricultural land. However, no tax is to be deducted if the consideration for transfer of
immovable property is less than Rs.50 lakhs.
Since this provision requires deduction of tax by the transferee, it presupposes that the
transferee should have a TAN. This may cause genuine hardship to those transferees who do
not possess a TAN. Further, it would be an additional burden to require such persons to
apply for and obtain TAN for a single transaction.
To address this concern, sub-section (3) has now been inserted in section 194-IA to provide
that provisions of section 203A containing the requirement of obtaining TAN, shall not apply
to a person required to deduct tax in accordance with the provisions of section 194 -IA.
8. Higher TDS under section 206AA not to be applicable in respect of tax deductible
under section 194LC
Section 194LC, inserted by the Finance Act, 2012, provides for a concessional rate of
withholding tax @ 5% on payments to non-residents in a case where an Indian Company
borrows money in foreign currency from a source outside India either under a loan agreement
or by way of issue of long-term infrastructure bonds.
Though the provision provides for concessional rate of tax @ 5%, in absence of PAN of the
Non Resident lender, section 206AA mandates withholding at higher rate of 20%. This is
perceived to be onerous considering that section 115A envisages exemption from filing return
for the Non Resident where tax is deducted by the borrower and paid to the Government.
Hence, obtaining PAN for the sole purpose of avoiding adverse impact of section 206AA
results in an empty formality.
To address this concern, sub-section (7) is proposed to be inserted in section 206AA to
provide that the provisions of section 206AA shall not apply in respect of payment of interest
on long term infrastructure bonds, as referred to in section 194LC, to a non-corporate non-
resident or to a foreign company.
9. Introduction of new section 194LD to provide concessional rate of TDS in respect of
interest income of a non-resident from rupee-denominated bonds or government
securities consequent to the amendment in section 206AA
The Finance Act, 2012 had amended section 115A to provide that Interest payable by an
Indian company to a foreign company or a non-corporate non-resident in respect of borrowing
made in foreign currency from sources outside India between 1.7.2012 and 30.6.2015 would be
subject to tax at a concessional rate of 5% on gross interest (as against the rate of 20% of gross
interest applicable in respect of other interest received by a non-corporate non-resident or foreign
company from Government or an Indian concern on money borrowed or debt incurred by it in
To avail this concessional rate, the borrowing should be from a source outside India under a loan
agreement or by way of issue of long-term infrastructure bonds approved by the Central
Government. Such interest paid by an Indian company to a non-corporate non-resident or a
foreign company would be subject to TDS@5% under section 194LC.
For enabling subscription by a non-resident in the long term infrastructure bonds issued by an
Indian company in India (rupee denominated bond), a proviso was proposed to be inserted in
section 194LC(2) by the Finance Bill, 2013 to provide that where a non-resident deposits
foreign currency in a designated bank account and such money as converted in rupees is
utilized for subscription to a long-term infrastructure bond issue of an Indian company, then,
for the purpose of this section, the borrowing by the company shall be deemed to be in
Accordingly, as per the above proposal, tax would be deducted at the lower rate of 5% in
respect of interest income arising to the non-resident from such rupee denominated long-term
infrastructure bonds provided the conditions specified in the section are fulfilled.
In order to exempt non-residents and foreign companies from the applicability of higher rate
of TDS on account of non-furnishing of PAN, it is now proposed that the provisions of section
206AA would not be made applicable to TDS under section 194LC.
Therefore, for providing a concessional rate of TDS in respect of interest income arising from
rupee denominated bonds or government securities, a separate section 194LD is proposed to
be inserted. This section provides for concessional rate of TDS in respect of interest on such
bonds and government securities payable to FIIs and QFIs during the period from 1.6.2013 to
31.5.2015. It may be noted that the provisions of section 206AA would be applicable in
respect of TDS under section 194LD.
Consequential amendments are proposed to be made in section 115A providing for taxability
of certain income of, inter alia, foreign companies and section 195 providing for deduction of
tax at source in respect of payments to , inter alia , foreign companies.
Likewise, consequential amendments are also proposed to be made in section 115AD
providing for taxability of certain income of FIIs and section 196D providing for deduction of
tax at source in respect of income payable to FIIs.
10. TCS provisions under section 206C to also be attracted on cash sale of gold coins and
articles weighing 10 gms or less
The Finance Act, 2012 had inserted sub-section (1D) in section 206C to provide for collection
of tax at source on sale of bullion or jewellery in cash, if the consideration exceeds Rs.2 lakh
and Rs.5 lakh, respectively.
A coin or article weighing 10 gms or less was, however, excluded from the applicability of the
provisions of this section.
Since the exclusion was giving an opportunity for misuse, the same is now proposed to be
withdrawn with effect from 1.6.2013. Consequently, the provisions for tax collection at source
under section 206C would be attracted even in respect of cash sale of coins or articles
weighing 10 gms or less, if the consideration exceeds Rs. 2 lakh.
11. Sitting or Retired Judge of High Court with at least 7 years of service eligible for
appointment as President of Appellate Tribunal
Section 252(3) provides that the Central Government shall appoint the senior Vice -President
or one of the Vice-Presidents of the Appellate Tribunal to be the President thereof.
Sub-section (3) of section 252 is proposed to be substituted to provide that a person who is a
sitting or retired judge of a High Court and who has completed not less than 7 years of
service as a judge in a High Court may also be appointed by the Central Government as a
12. Land classified as agricultural land in the records of the Government and used for
agricultural purposes not an asset chargeable to wealth-tax
Section 2(ea) of the Wealth-tax Act, 1957 is proposed to be amended to clarify the real intent
of the law, i.e., the agricultural land in the records of the Government and used for agricultural
purposes shall not be considered as urban land even if it falls within the specified urban
limits. Consequently, such land would not be chargeable to wealth-tax.